International Securities Exchange, Inc. - Company Overview - Company History


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Corporate Overview

The International Securities Exchange, the world's largest equity options exchange, was founded on the principle that technology fosters and infuses new efficiencies and operational innovations into securities trading. After developing an innovative market structure that integrated auction market principles into an advanced screen-based trading system, ISE launched the first fully electronic US options exchange in May 2000. ISE continually enhances its trading systems to provide investors with the best marketplace to execute their options orders.


ISE redefined the US options industry by introducing electronic trading, competition, and lower fees and efficient, equitable pricing, enabling instantaneous executions in tight, liquid markets.

Prior to ISE, the US options industry was markedly different. In the 1980s and 1990s, while other financial markets were embracing electronic trading, the US options exchanges remained steadfastly committed to open-outcry trading. The options exchanges also continued the practice of exclusively listing options on most blue chip stocks on only one exchange, limiting customer choice, and forcing brokerages to maintain trading operations on the floor of each exchange.

Driven by the principle that a fair market structure and technology enables better quality trading for investors, ISE's founders started in 1997 planning an exchange that would address the concerns of potential and current options investors and establish a new standard in US financial markets.

Bill Porter, then-chairman of E*Trade, and his colleague, Marty Averbuch, began an investigation into the costs and barriers that prevented retail investors embracing the buying and selling of options. Seeking to facilitate arrangements similar to those available for stocks in the OTC and third markets, they began to negotiate directly with the existing options exchanges to lower costs. Due to the structure under which options exchanges then operated, they were unable to obtain concessions on costs of execution. Messrs. Porter and Averbuch then engaged David Krell and Gary Katz, former executives of the New York Stock Exchange's options division, to examine the feasibility of developing a new US options exchange. ISE was funded by a consortium of broker-dealers whose purchase of exchange memberships provided initial development capital.

ISE, which was launched May 26, 2000, became the first registered exchange approved by the Securities and Exchange Commission since 1973, and a member-owner of The Options Clearing Corporation.


ISE changed the fundamental nature of US options trading.

Before ISE traded its first contract, it had affected the US options industry by fostering inter-exchange competition. When ISE announced its intentions to list only those options that represented 90% of industry volumes, it prompted the multiple-listing of the most liquid options classes which dramatically improved prices for all investors and broke apart the franchises that had enabled the floor-based exchanges to exclusively list options on most blue-chip stocks.

The scalability and efficiency of ISE's business model and the absence of a trading floor and intermediaries such as floor brokers enabled the exchange to charge lower execution fees. ISE's proposed fees prompted an industry-wide scramble to lower fees. ISE's business model attracted many well-capitalized global financial institutions to join as members. These firms, that had previously viewed participation in the options market as costly and inefficient, have significantly increased the overall liquidity in the options market.

As the first fully electronic options exchange, ISE also introduced the efficiencies of electronic trading to the options industry. ISE developed patented proprietary trading technology, which resulted in tighter markets and enabled executions in 0.2 seconds. ISE also strongly advocated for electronic linkage of all options markets, which enables specialists and market makers at different exchanges to access each other's markets, thereby enabling customers to get the best price when they trade, no matter where they trade.

ISE launched on May 26, 2000. The first transaction was a purchase of 20 SBC Communications October 45 calls. The ISE introduced transparency to the options markets by insuring that displayed markets are accompanied by size. Within three months, ISE had traded more than one million options contracts. A year later, ISE had reached the 25 million contracts traded mark, and celebrated its first anniversary. By the end of 2001, ISE had traded its 50 millionth contract, completed a major trading system upgrade, and become the third-largest US options exchange.

Building on momentum, ISE experienced further growth in 2002, achieving its goal of listing equity options representing 90% of average daily trading volume in the US options industry. The exchange completed two trading system upgrades that established the foundation to offer enhanced trading capabilities. In 2003, the one-size fits all trading rule and ISEspreads went into effect, which helped provide the momentum for ISE to trade its 250-millionth contract and become the largest US equity options exchange.

In 2003, ISE implemented the technological and regulatory foundation to trade index options, which will allow ISE to expand its product base. ISE also launched the ISE Sentiment Index (ISEE) which measures opening customer transactions in call and put options, providing investors with information on the customer buying and selling activity within the world's largest equity options exchange. ISE was named Derivatives Exchange of the Year by Risk Magazine for the second time in three years in January 2004.

On March 9, 2005, ISE became the first securities exchange to sell its shares in an initial public offering. ISE's shares are traded on the New York Stock Exchange under the symbol ISE.